Recent Posts

Why would anybody want to do business with an institution that
systematically participated in a widespread fraud over a period
of years? I guess that very statement could likely be said of
many global banks in regard to the scandal encompassing the
manipulation of Libor.

Today, though, the scarlet letter is applied to the Union Bank of
Switzerland as it pleads guilty to fraud in the manipulation of
Libor and other benchmark interest rates. This bucket shop has
agreed to pay a $1.5 billion fine.

Adding to the drama is the fact that, according to The Wall
Street Journal, some individuals connected to UBS in this
scandal are likely to be arrested today in the United States. Who
and how many will make for riveting theatre. Let’s navigate as
the WSJ writes, UBS to Pay $1.5 Billion to Settle
Libor Charges:

As part of the deal, UBS acknowledged that dozens of its
employees were involved in widespread efforts to manipulate the
London interbank offered rate, or Libor, as well as other
benchmark rates, which together serve as the basis for interest
rates on hundreds of trillions of dollars of financial contracts
around the world. UBS’s unit in Japan, where much of the
attempted manipulation took place, pleaded guilty to one U.S.
count of fraud.

Authorities on Wednesday painted a picture of “routine and
widespread” attempts by UBS employees to rig Libor and the euro
interbank offered rate, or Euribor. The U.K. Financial Services
Authority said it had identified more than 2,000 such attempts
between 2005 and 2010 with the participation or awareness of at
least 45 UBS traders and executives.

Adding to the severity of the allegations, the FSA said UBS
engaged in collusive efforts with other financial institutions to
rig the benchmarks. Among other things, the Swiss bank made
“corrupt brokerage payments” to so-called inter-dealer brokers to
reward them for helping to coordinate attempted manipulation
among multiple banks, the FSA said.

In the U.S., law-enforcement authorities on Wednesday are
expected to arrest people with ties to UBS, likely representing
the first time that anyone faces criminal charges stemming from
the long-running rate-fixing investigation, according to people
familiar with the case.

How is it that this scandal does not rise to the level of a
racketeering violation?

Who were the senior executives at UBS during this time frame? I
have long maintained that this scandal operated with the
knowledge and blessing of those charged with running the banks.
The names and levels of responsibility of those arrested today
will be very telling in terms of seeing how high the blanket of
political protection runs in this organization. Very telling.

As a longstanding friend of mine once said about shops like this,
if they took the trading monitors out and replaced them with
sewing machines, the place would have been shut down a long time
ago.

I have no affiliation or business interest with any entity
referenced in this commentary. The opinions expressed are my own.
I am a proponent of real transparency within our markets so that
investor confidence and investor protection can be achieved.